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Mar 02, 2012

Alternative renewables ownership models come under the spotlight at Numsa conference

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The National Union of Metalworkers of South Africa (Numsa) recently hosted an international conference on alternative models of ownership for renewables other than independent power producers (IPPs). International delegates came from Mexico, China, Venezeula and France, besides other countries, to speak about their experiences.

Numsa, of all the Congress of South African Trade Unions affiliates, has been most active with respect to green economy issues and renewables. The trade union also has active shop stewards involved in green economy issues in different sectors. Numsa’s coordinated approach is impressive.

Numsa is also opposed to nuclear power and sees renewables as a strategic intervention to stimulate green growth. Numsa’s priority is employment growth and it wants to ensure that any green economy investments driven by the public sector are stable, reach critical mass and are sustainable. Numsa, like so many unions, is an ally of the green economy, but only if this is not all about profiteering and a new form of worker exploitation. The green economy is an important part of the real economy – it has the potential, if implemented in the right way, to expand our manufacturing base.

The Numsa conference focused on how renewables development is managed and who benefits from the stimulation of this sector around the world as this could foretell the future of the sector in South Africa.

There is always the danger that the green economy becomes a rapacious rent-seeking affair in which national interests become subsidiary to greed. There is already an element of that in the solar water heating industry – if one considers the plethora of companies that have flourished on the back of a subsidy and government procurement. Subsidies should temporarily lift the economics of green technologies but, if they are not well managed, they are often gamed for rents.

Numsa’s conference opened a new vista of debate that should be welcomed, and proposals coming out of the conference should be given some thought. So far, we have only two types of ownership models: State and private. Eskom is building a sliver of renewables and the rest of the projects are being roll out by private developers.

The Numsa conference facilitated an exposition of many alternative models and options to mull over, drawing from international experience.

There is nothing to suggest that IPPs cannot be community owned but the IPP concept driven by the National Treasury’s public–private partnerships unit is based on a distinct ‘private owned’ model.

Why did Numsa take an opposite view to the prevailing IPP model? Ownership matters because it defines the weight of public interest compared with private self- interest. This, in really, is the nub of the question that the Numsa conference sought to under- stand and debate. Numsa was seeking to unpack a few things. The trade union was seeking to open the debate on alternative models of ownership where the social dividend is greater than excessive profit taking. It posited that the IPP model, as it stands, needs to diversify opportunities for alternative forms of ownership and the conference debated questions about who owns the green economy, as the roll-out of the IPP procurement process may not necessarily lead to high enough levels of localisation because an IPP approach may be too fragmented to support greater thresholds of localisation. Numsa was also seeking to demonstrate the poverty of ideas and the lack creativity in the current model of renewables procurement.

Currently, communities can participate in private-led initiatives either as joint shareholders or through broad-based black economic-empowerment arrangements. But the private ownership model is the dominant model for IPPs in South Africa.

International delegates shared experiences on costs related to the roll-out of renewables using a private-sector- driven IPP model, compared with a public-sector-owned and -driven renewables build programme. Depending on the rate of return demanded by shareholders, certain types of ownership models can deliver a public good at much lower costs than a pure privately owned model.

Lots of examples were given of how local communities in Denmark, France, Germany and Mexico evolved renewables ownership models where communities owned wind or solar projects. Community shareholders also had access to soft loans from cooperatives and State or development banks.

Numsa fired the first salvo with respect to thinking about alternative models. At the end of the conference, Numsa said it recognised that the current IPP process could not be stalled, but that it could be influenced. Numsa is thinking of establishing a ‘Bid Watch’ initiative to ensure that the current bid process is not subject to corruption and is run in a way that ensures diversification of ownership and other social benefits.

Edited by: Martin Zhuwakinyu
Creamer Media Senior Deputy Editor
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